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In Chapter 13, it is relevant whether the mortgaged property is the debtor's home, because §1322(b)(2) states that a Chapter 13 plan can modify the rights of holders of secured claims, except a claim secured only by the debtor's home. In Nobleman v. American Savings Bank, 508 U.S. 324 (1993), a Chapter 13 debtor argued he could strip down a home mortgage to its value under §506(a). The court rejected this argument, concluding that Congress intended to protect a home mortgage lender's rights under state law, and that the bundle of rights enjoyed by home mortgage lenders under state law included the right to retain the lien until the debt is paid in full, regardless of the property value. Every circuit court that has considered the related issue of whether a junior home mortgage can be stripped off in Chapter 13, however, has declined to extend Nobleman. In re Pond, 252 F. 3d 122 (2nd Cir. 2001); re McDonald, 205 F.3d 606 (3rd Cir. 2000); re Bartee, 212 F. 3d 277 (5th Cir. 2000); re Lane, 280 F.3d 663 (6th Cir. 2002); re Zimmer, 313 F.3d 1220 (9th Cir. 2002); and re Tanner, 217 F.3d 1357 (11th Cir. 2000), the courts reasoned that when there is no value to support the junior mortgage, it is not "secured" by the home under §506(a), and therefore the antimodification protections of §1322(b)(2) do not apply. Therefore, in Chapter 13, senior home mortgages cannot be stripped down, but the majority view is that junior home mortgages can be stripped off. Interestingly, the majority view allowing lien stripping of junior home mortgages in Chapter 13 is the minority view in Chapter 7. That leaves us with Chapter 13 cases involving non-home mortgages, which are commonly sought to be avoided because they do not enjoy the anti-modification protection of §1322(b)(2). The Seventh and 10th Circuits recently held that liens cannot be avoided in Chapter 13 under §506(d) because Dewsnup's interpretation of §506(d) in the context of a Chapter 7 applies equally in Chapter 13. In re Ryan, 2013 U.S. App. LEXIS 13710 (7th Cir. July 8, 2013) and re Woolsley, 696 F.3d 1266 (10th Cir. 2012), however, another basis for lien avoidance of non-residential mortgages in Chapter 13 can be found in §1325(a) (5)(B). That section states that the holder of an allowed secured claim retains its lien until the earlier of (a) payment of the claim in full under non-bankruptcy law or (b) payment of the value of the secured claim and entry of a Chapter 13 discharge. 122 In Associates Commercial Corp. v. Rash, 520 U.S. 953 (1997), the Supreme Court held that under §506(a), the value of the secured claim for purposes of §1325(a)(5)(B) is the replacement value, defined as the amount of money it would cost the debtor to buy the same collateral for the same use. For these reasons, in Chapter 13, non-residential senior mortgages that are only partially supported by value can be stripped down, and junior mortgages that are wholly unsupported by any value can be stripped off. There are many other issues with respect to mortgage lien avoidance that go beyond the scope of this article. For example, are adversary proceedings required to avoid a mortgage lien, or can it be accomplished by motion or through the plan confirmation process? The area of mortgage lien avoidance in bankruptcy is complicated, particularly because procedural and substantive practices vary by jurisdiction. When faced with a bankruptcy case that seeks to avoid a mortgage, consultation with local counsel is recommended to avoid unnecessary losses and exposure. This "From the Bench" article was contributed by Peter C. Bastianen, an attorney at Codilis & Associates, P.C., headquartered in Chicago. Indiana rank: 17 90+ Day Delinquency Rate Foreclosure Rate June 2013 2.7% Unemployment Rate 2.9% V ersatile Real Estate Solutions 8.4% year ago 3.0% 4.2% 8.4% year-over-year change -9.9% -29.9% 0.0% Top County Cass CounTy 90+ Day Delinquency Rate Foreclosure Rate June 2013 3.4% 6.1% year ago 3.9% 5.5% year-over-year change -11.7% 9.4% Top Core-Based statistical area 90+ Day Delinquency Rate LogansporT, In Foreclosure Rate June 2013 3.4% 6.1% year ago 3.9% 5.5% year-over-year change -11.7% 9.4% note: The 90+ day delinquecy rate is the percentage of outstanding mortgage loans that are seriously delinquent. The foreclosure rate is the percentage of outstanding mortgage loans currently in foreclosure. State rank is based on the June 2013 foreclosure rate. All figures are rounded to the nearest decimal. The unemployment rate reflects preliminary June 2013 figures released by the Bureau of Labor Statistics. All other data courtesy of LPS Applied Analytics.

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